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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: hlpinout who wrote (94117)	12/10/2001 10:50:59 PM
From: hlpinout	Respond to of 97611

COMPANIES & FINANCE THE AMERICAS: Deal doubts dent Compaq share price Financial Times; Dec 11, 2001 By SCOTT MORRISON Shares in Compaq Computer fell almost 12 per cent yesterday amid speculation that the computer maker should pull out of a Dollars 25bn takeover bid from Hewlett-Packard. The fall pushes the spread between what HP will pay - and Compaq's market price yesterday afternoon of Dollars 9.97 - to almost 46 per cent. Under the terms of the deal, each Compaq share is worth 0.6325 HP shares. HP's bid for Compaq was dealt what could be a fatal blow on Friday when the Packard Foundation, its largest shareholder, said it planned to vote against the transaction. Don Young, a UBS Warburg analyst who opposes the deal, said he believed Compaq would move quickly to end it. "Compaq has a lot to lose from the uncertainty of the deal and needs to begin reassuring customers immediately if the deal is off," he said. "Accordingly, we believe it will be in Compaq's interest to waive the (Dollars 675m) break-up fee and let both parties out of the transaction," he said in a research note. Compaq maintained yesterday that it was fully committed to the deal. The foundation's opposition has effectively created a voting block of Hewlett and Packard family members with about 18 per cent of shares aligned against the transaction. Andy Neff, analyst at Bear Stearns, suggested it was too early for Compaq to consider pulling out. He noted that the foundation's "preliminary" decision indicates that there was still room to renegotiate the transaction. The companies argue that the deal would create a group with the size and clout to provide customers with competitive products in a wide range of sectors. Critics have largely focused on worries that the takeover would dilute HP's profitable printing business by increasing the company's exposure to the competitive personal computer market. Analysts have said that with family members opposing the deal, HP would need to win the support of about two-thirds of institutional shareholder votes. Research by Richard Gardner, analyst at Salomon Smith Barney, indicates that, apart from family holdings, roughly 54 per cent of the company's shares are owned by institutional shareholders and 27 per cent by retail shareholders. Assuming no retail shareholders vote, HP would need 78 per cent of those institutional holders to vote for the deal. www.ft.com/hp Copyright: The Financial Times Limited 1995-1998